How Compensation is Determined in an Expropriation

It can be difficult to accept, after working hard to make the money you need to buy a property, or after receiving property through inheritance, that the municipal, provincial and federal governments, have the right to take the property away without the owner’s consent in an expropriation.

In fact, a Royal Commission Inquiry into Civil Rights conducted in 1968 concluded that “there is general agreement that the exercise of this power (to expropriate) in actual cases constitutes and invasion of civil rights in our current legal system. Notwithstanding this, the power conferred and exercised in proper cases and according to proper principles in necessary in the public interest.”

In other words, what the Commission tells us is that, while it is recognized that expropriation is an invasion of civil rights under the law, it is necessary for governments to have the power to expropriate property, when the expropriation is in the public interest.

But the Commission, recognizing the violation of the landowner’s civil rights, set out what has become one of the main purposes behind the Ontario Expropriations Act, which is “the fulfillment by the state of its obligations to repair the injury caused to particular individuals for the public good, and to minimize the loss, inconvenience, and disturbance to the life of its citizens to as great an extent as possible”.

Ultimately, under the Expropriations Act, “repairing the injury” to landowners and other stakeholders, including tenants affected by an expropriation is done by compensating them with a fair market value for the property being expropriated.

So, if you receive notification that your property is being expropriated, receiving fair market for the property will be your only compensation for the property (there are other provisions in the Expropriations Act that stipulate other compensation to you for other costs and damages that are due to the expropriation).

Therefore, how the fair market value of a property is determined, and the amount of the compensation that results from that determination, are of great importance to property owners. It is all they will get in exchange for the violation of their civil rights, in the interests of the public good.

The Expropriations Act offers the following standard to be used in determining fair market value: “the market value of land expropriated is the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer.”

But, while the standard for determining market value in the Expropriations Act is objective, there are other mitigating circumstances that can affect market value in different ways and the Act goes on to clarify those circumstances.

As property values can fluctuate significantly over the course of an expropriation, the Expropriations Act outlines three options that property owners have for dates on which the market value of the property is based. These include, the date that the notice of a hearing is served (where there has been an inquiry), the date of registration of the expropriation plan, or the date the expropriation notice was served to the landowner.

Considering that all those dates come before the expropriating authority’s development of the land, The Expropriations Acts specifically states that increases and decreases in the value of the land due to its development after expropriation must be ignored.

Landowners have the option to accept the initial compensation offer made by the expropriating authority, negotiate additional compensation with the expropriating authority or get an arbitration settlement through the Ontario Municipal Board.